A budget reality check
We got another budget from Rep. Paul Ryan (R-Wis.) today. He’s again calling it “The Path to Prosperity,” and there is a lot about it that is familiar.
Ryan says that, with his pan, the U.S. would have a balanced budget in 10 years. But don’t let all the numbers and charts mislead you, budgeting is imprecise. That is something Ryan seemed to acknowledge.
“Balancing the budget is not simply an act of arithmetic,” he said. “Not just getting expenditures and revenues to add up.”
Lawmakers’ budgets are based on forecasts — predictions, conjecture. June O’Neill, who used to head the Congressional Budget Office, teaches economics at Baruch College. “It’d be an accident,” she said, if those forecasts “ever came true.”
“Yogi Berra once said, ‘It’s difficult to make forecasts because we don’t know what’s going to happen in the future.’” Especially in the long-term, she adds. “How can you possibly guess the behavior of all the different parts of the budget?”
Those parts include demographic changes and GDP, and no one knows how fast the economy is going to grow, or if it is going to grow. Ryan says he expects economic growth will outpace a rise in government spending of 3.4 percent.
Ph.Ds can make model after complicated model, but they can’t predict what the unemployment rate is going to be in a decade.
“If you’re going to be looking out at the budget over the next ten years, you’re forced to make an assumption,” says Randy Kroszner, Norman R. Bobins Professor of Economics at The University of Chicago Booth School of Business.
Lots of them, really. And that’s what Paul Ryan has done. He has also made political assumptions. A big one is that Congress will repeal President Obama’s health care law. Another one is more fundamental — that our priority right now should be to balance the budget.
David Kendall is a senior fellow at Third Way, and he says not everyone is sold on that point.
“Most economists think that, if we have about a three percent deficit, that makes it a sustainable deficit.”
The Democrats will make their rebuttal tomorrow, when Sen. Patty Murray (D-Wa.), the chair of the Senate Budget Committee, unveils her budget — based on her own set of assumptions.
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